News & Tax Insights

With the election of the Liberal/National Party Coalition to form a new Government, we can look forward to a number of significant changes to our taxation laws. Firstly, we have the big ticket items of getting rid of the Mining Tax and the Carbon Tax and cancelling the proposed abolition of the Statutory Method for determining Fringe Benefits Tax on motor vehicles.  This latter measure which was brought in without consultation was on the way to destroying salary packaging advisory businesses and creating considerable harm to the motor vehicle industry. To make some savings to help pay for all of…

This is a perennial question. If you are a share investor, your shares are held on capital account and, provided you meet the CGT conditions (eg holding an asset for more than twelve months), you are subject to tax on only 50% of the gains. However, if you are a share trader, you can claim up-front deductions for any paper losses you might incur because your shares are treated as trading stock and you can value the shares you hold at the end of a financial year at either their cost or market value. So, if you want to get…

Despite giving lip service to “red tape reduction” and setting up committees for that purpose, it seems that Governments and their associated bureaucracies cannot help themselves. Here are some extra complexities placed on Super Fund trustees just in the past several months: Abolition of excess concessional contributions tax. This is not an abolition, it will be paid by the taxpayer instead of the Super Fund and an interest charge will be added. However, you can arrange for a release of excess concessional contributions which would otherwise automatically trigger the bring forward provisions for non-concessional contributions. Division 293 Tax. This new…

In pursuit of its “class warfare”, the Gillard/Swan Labor Government introduced a complicated new 15% super tax on so-called “high income earners” and people will start receiving new assessments very shortly. Broadly, the new tax applies to people earning more than $300,000 and is calculated as a percentage of deductible super contributions. A high income threshold has been fixed at $300,000 and the new tax applies where your adjusted income for surcharge purposes exceeds this amount. This income amount (adjusted income for surcharge purposes) is calculated as follows: Your taxable income Plus reportable fringe benefits Plus total net investment losses…

A Self Managed Super Fund wanting to borrow to buy a property faces an unnecessary complication in that the property must be held by a separate company under a bare trust on behalf of the Super Fund. When the borrowing is repaid, it is necessary to transfer title of the property from the bare trust to the Super Fund, however in many States this would involve a substantial stamp duty cost. In Queensland, the Duties Act 2001 has been amended to exempt from stamp duty a transfer of property to the Super Fund when the loan is repaid. Due to…

Mr John Symond, the founder of ”Aussie Home Loans” needed advice about how to extract funds from his company to complete construction of his home without paying excessive tax. He went to one of the leading law firms in Australia who specialise in taxation advice and was advised that he could withdraw funds on a tax-free basis by redeeming preference shares issued by a new corporation which owned all of the entities making up the Aussie Home Loans Group. Following an audit, the Tax Office disallowed the arrangement and eventually Mr Symond had to settle with the Tax Office involving…

Heavy responsibilities are placed on directors of companies which fail to pay their PAYG withholding and SGC obligations as they fall due. Directors become personally liable for a penalty equal to the amounts unpaid on their due dates. When these amounts remain unpaid by companies, the ATO will issue Director Penalty Notices to the directors and will only remit those penalties if the company pays the outstanding amounts. The penalty will also be remitted if, within 21 days of receiving the Director Penalty Notice, the directors place the company into Voluntary Administration or Liquidation. This remission however will only take…

The lenient approach to debt collection taken by the Tax Office during the Global Financial Crisis has been discarded and replaced with a new hard-line.  This follows a blowout in outstanding tax debts from 5% of revenue to 11% ($15 billion) last year.  The new approach includes the early instigation of garnishee notices and windup proceedings. During the 2011 financial year, the Tax Office instigated more than 10% of all windups (numbering over 1000).  This is double the figure for 2010. It is using a new business viability software tool to determine whether a softly-softly approach or firm action is…

Tax laws have been changed to allow Foreign Income Tax Offsets to be applied against the Medicare levy, Medicare levy surcharge and Flood levy with effect from the 2008-09 income tax year. This could be of substantial benefit for professionals that remain Australian tax residents whilst working overseas for a period of time. Previously, the Tax Office said that your foreign income tax offsets could only be applied to the income tax component and not to these levies. This caused a very unfair circumstance where people working overseas that remained Australian tax residents were required to continue to pay these levies, in…

Where the termination of employment is deemed a “Genuine Redundancy” under the tax rules, payments that the employee receives for the termination that exceed the amount that would be received after a voluntary resignation get special, reduced tax treatment. A Base Amount and a further Service Amount for each Year Of Service may be entirely tax-free!  For the 2013 income year, the base amount is $8,806 and the service amount for each year of service is $4,404.  Accordingly, and as an example, the tax-free limit for a Genuine Redundancy payment where there is ten years of service would be: $8,806…

In January, the Tax Office announced a new data-matching program to target people receiving tax-free pensions from Centrelink and the Department of Veterans' Affairs for the 2011 and 2012 income years. In total, the records of 1.8 million individuals held on Government Computers will be matched against the Tax Office records of names, addresses etc to check whether tax obligations and claims for dependent tax offsets are correct.

Businesses providing contractor services to Councils in Queensland, New South Wales, Victoria and Tasmania during the 2011 and 2012 income years will be subject to data matching undertaken by the Tax Office. The Tax Office expects to electronically match details of 20,500 taxpayers to check whether all tax payment and lodgement obligations have been met. Careful review of BAS, tax return and other ATO details may be appropriate.

The NSW Supreme Court refused an exemption from NSW land tax for the owners of land in NSW that was used for cattle grazing with a herd of up to 40 cattle because the Court concluded that the farming operations did not have sufficient commercial purpose or character. The NSW Land Tax Act provides an exemption from land tax where the land is used for primary production and it is: •         Zoned “rural”, “rural residential” or “non-urban”; •         The Chief Commissioner is satisfied it is rural land; or •         The primary production has “significant and substantial commercial purpose or character”…